Wood pellet economics

The economics of wood pellets depends on how and where they are produced, how they are distributed, what they are used for, the comparative costs of alternatives, and the value of government interventions.

Production

The biggest factors in the production cost are:

  1. Feedstock cost
  2. Energy cost
  3. Labour cost
  4. Capital cost

Feedstock

The cost of the feedstock depends firstly on whether the wood pellets are being made with virgin fibre or with recovered materials.

Recovered wood

Competing alternatives for high-grade recovered wood is driving up the cost of recovered wood in the UK significantly. Producers may have to pay as much as £50/tonne for recovered wood of a suitable grade to produce wood pellets.

Virgin fibre

In the UK, virgin fibre feedstock may cost around £35-45/tonne, tending higher over time. Virgin fibre will be cheaper in regions with denser forestation and warmer climates with a faster regrowth rate.

Moisture content

If virgin fibre costs £40/tonne at 55% moisture, it costs £80/tonne of pellets at less than 10% moisture. That does not take account of the cost of drying (or chipping or other parts of the process), just the effect of reducing the moisture content.

Recovered wood typically has a significantly lower moisture content than green wood. Some of it may not need drying at all. If the average moisture content of recovered wood is 20%, £50/tonne of feedstock equates to around £60/tonne of dry feedstock for pelletising.

Small roundwood and stemwood may be air-dried naturally to some extent (e.g. while sitting at roadside), and will therefore arrive at a lower moisture content. Forest owners are unlikely to let the material dry naturally unless they can secure a better price per tonne for it. Virgin fibre feedstock will normally cost £70-90/tonne of pellets, whichever type of material is used and whatever its moisture content.

Bark

 

Energy

 

Labour

 

Capital

 

Supply & Distribution

 

Use

Heat

 

Electricity

 

Bedding

After putting down the initial bed, you will need to replace less of the wood pellets per day than with shavings or straw, because only the soaked areas need changing and the muck can be relatively easily separated from the bedding. Anecdotally, you will need around 10-15 kg every 2 to 4 days. That's around 75p to £2 per day.

Straw costs vary widely depending on size of purchase, supply and demand (e.g. seasonality), and frequency of replacement. Using straw may cost 50p to £1 per day.

The cost of shavings will also depend on availability. They may cost £8-9 per bale when available, and may need around a bale a week, giving a cost of around £1.15 - £1.30 per day.

Mucking out is said to be easiest and quickest with wood pellets. For an economic comparison, you need to add the cost of your time to the cost of the bedding.

Litter

 

Information about the economics of using wood pellets, including the effect of government incentives such as the Renewable Heat Incentive (RHI).

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